Tuesday's Market Minute: TGT, WMT Earnings Reveal Low Price Leader of Big Box Stores

Retail sales posted better-than-expected numbers for July, instilling some hope in the strength of the consumer as inflation normalizes. But what will two of the largest retailers tell us about how consumers are spending their money? Target TGT and Walmart WMT are set report earnings this week, and expectations for the two couldn’t be more opposite.

 When Target reports earnings on Wednesday, analysts expect adjusted earnings per share to fall from the prior quarter to $1.48. And just yesterday, Stifel cut its price target on the stock to $160 from $175. That’s still a significant move to the upside. However, there are reasons why the analyst kept the stock at a hold rating. While Stifel’s recent customer survey showed continued positive spending intentions for both Target and Walmart for the fourth consecutive period, analysts are expecting muted discretionary spending at Target to continue to negatively impact comparable sales growth. 

Analysts are more positive on Walmart and see proof of it taking market share away from Target. However, they’re still somewhat cautious, due to the weakness in discretionary categories. They expect adjusted earnings to rise from last quarter to $1.68 a share for Walmart. And Stifel raised its price target on Walmart to $167 from $163, just three dollars above where the stock closed on Monday. The analyst expects Walmart to report second quarter comp growth and earnings better than consensus estimates. And even though there’s some weakness in discretionary categories, Stifel expects that to be offset by Walmart’s ongoing grocery share gains, and its pass-through of inflation-based pricing. 

As inflationary pressure continues to normalize, consumers are becoming more selective about where they spend their dollars. And for the present moment, between the two Big Box stores, Walmart takes the crown as the low-price leader

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